BRIC countries have received a lot of attention in the past decade due to both their economic growth and competitive pricing on exports, but also for their maturing online users and the vast return potential it has given to entrepreneurs in their late dotcom boom. Although many BRIC entrepreneurs have developed their own web ideas and innovative technologies, many recent big exits have come from reproducing US and European business models, a practice often referred to as ?copycats?.
It does make you wonder whether copycats are as bad as the name sounds, and whether they do not have a sense of innovation in markets that haven?t yet experienced the benefits of certain long-popular-in-the-west web and mobile platforms.
It has been really hard for entrepreneurs to win a user base for copycats of Facebook in the US or Europe, given it had already become famous and broadly used, but given the political circumstances of China, among other things, it was certainly easier to do so there. That might explain why most European copycats of facebook have just over 100,000 users while Renren (or Xiaonei), the Chinese copy-cat claims 117M users and has raised $740M in its recent IPO.
There is no shame in reproducing a business model that works in another country, learn from their mistakes and accelerate user adoption in your local market. Entrepreneurs have done this since the beginning of times, from the application of 6-Sigma to the rodizio restaurants across Europe and America.
But in a (Silicon Valley) World where innovation and originality are always seen as the most important attributes for success, the international reproduction of an existing online model is badly perceived (although in some cases it is so shameless you can?t help but feel they are taking a ride on someone?s hard work and success ? see rutube.ru. But if execution is the most important element of taking an idea to success, is it really that bad to build copycats?
Well, they may be more numerous in BRIC countries, but they have worked just as well in Europe, it just requires a lot more shooting power here (aka venture capital).� Citydeal raised over ?4M to copy GroupOn (as shamelessly as the previously mentioned Russians) in time to build a vast user base that translated into an early exit through a GroupOn acquisition. GroupOn?s case is exceptional in the sense that its model is so easy to reproduce, that it already has over 1025 copycats in Brazil, and over 1880 in China. �Exception or not, the giant has purchased a few copycats in Chile, Russia and Japan, but went on a fierce fight against their main rival in Brazil. �
GroupOn copycatted its copycat, Peixe Urbano (Urban Fish) with ClubeUrbano.com (Urban Club) prior to exploring their normal GroupOn brand in Brazil. Given the Brazilian fish and local leader has secured some of the best local talent and influential cash-rich investors in just over 14months of existence, it is doubtful that GroupOn will beat them locally despite them claiming they already own the market. That is precisely why copycats tend to work better in BRIC countries.
Those markets have emerged a lot faster than the Western World, and are very inward facing in comparison.
Most Europeans are well above the poverty line and speak English, and although they do stick to local players, they often have their eye on other markets, especially the US. Brazilians do not. Russians do not. Indians do not. And Chinese.... cannot.
What is probably one the greatest barriers to entry for US and European start-ups looking to expand to those markets, is the key advantage to any local entrepreneur reproducing successful business models from mature markets. They know their local audience, and how to successfully cater for them.
I would personally argue that GroupOn would have been better off buying Peixe Urbano than CityDeal, simply because buying CityDeal was only an accelerator, and a short one. ?If you can?t beat them, join them?. However with enough cash and a little time, GroupOn would have beaten them in the European market, like so many US grown start-ups do. But in emerged markets like Brazil, money and time will not guarantee success. Not only will it take longer to adjust to the local market, but it might not work. MercadoLibre is a good example ? the Latin American eBay copycat did an IPO in 2007 (with eBay holding to its few shares, acquired through the sell out of iBazar?s operations in Brazil to MercadoLibre) and remains regional leader.
Brazil may seem very similar culturally to America given the strong influence it has on the country?s youth via television shows, films and music, but it remains an emerged market where you need to understand the local culture of business and interrelations to identify the best talent, attract masses of users and close the best partnerships.
That might be why investors who?ve followed the ?replicate existing model and get a quick exit? strategy in BRICs have already seen great returns. In the case of Jose Marin and Fabrice Grinda�it might be down to the quality of their advice and engagement as investors, but one thing is certain ? serial entrepreneurs with experience across Europe, Americas and Asia are the best angels/advisors a BRIC copycat start-up can ask for.�
So why do most investors and growing start-ups from the US and Europe continue to look for investment opportunities and expansion across the Atlantic ocean before anywhere else? Brazil is already the 4th largest country in terms of online users in the World, with the average Brazilian spending more time online than any other nationality, and growing.
When I met one of the most famous Mobile-focused VCs in Europe at an event, they were surprised to hear how large and advanced Brazil is - it made me feel I knew a secret, a very public secret Europeans and Americans don?t see while they continue to face each other with blinkers.
Europeans and Americans continue to race each other, building ?TechCities? or moving to Silicon Valley in a quest to build the next Google or Facebook. In the meantime entrepreneurs in emerging and emerged markets are enjoying fast adoptions and early exits. $10M to $20M exits may sound less than ambitious in Europe or the US, but given the 2 to 3 year returns of 10 to 15 times in a World where only one out of a million entrepreneurs will hit the (speculated) Facebook jackpot, I wouldn?t overlook them.
This article was written by Joana Picq for today's launch of HotwirePR's advisory board�where she sits alongside other UK and European experts.�
Source: http://www.thenextwomen.com/2011/05/26/copycats-versus-innovation-bric-world
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